Never bet against premium NYC RE assets; they can occasionally look depressing (e.g. 911, GFC, and Covid) but almost always bounce back stronger. That, besides research work, supported my investment case in Vornado Realty ($VNO) in 2023 when the market believed the NYC office was dead. It has been a 2x in 1 year, and I’m still long.
Today, I introduce a recent spin-off from a large RE Community developer, Howard Hughes ($HHH). Over the last decade, it spent over $1Bn capital acquiring and developing one-of-a-kind RE assets in a premium NYC area. It is priced, on an adjusted Enterprise Value basis, 80% off its invested capital.
Spinoff, rights, Cap table
SEG is a Howard Hughes ($HHH) spin-off announced in July. It includes a collection of RE assets, primarily in NYC and Las Vegas.
The spin-off comes with a $175Mn rights offering ($25/share, 7Mn shares) backstopped by Bill Ackman ( 37.5% owner). It was launched in September and closed1 (over-subscribed) on Oct 10.
It has 12.7Mn shares, 5.7Mn from the spin-off, and 7Mn from the rights. At $31/share (10/22/2024), its market cap is ~$390Mn. With its $175Mn rights offering raise and $85Mn net debts ($100Mn debts, $10Mn preferred, ~$25Mn cash), enterprise value is $300Mn.
Its $100Mn non-recourse debts are secured by 2 assets (250 Water and Ballpark); thus a $200Mn adjusted enterprise value, as debts can be deducted from asset value.
MORE:
underhood.substack.com/p/nyc-premium-re-assets-at-a-80-fire
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